News > Financial Services

Alibaba ups its stake and pumps $680m into India's Paytm
Venture Capital
<p>Alibaba has made yet another incursion into Indian e-commerce, chucking $680 million at Indian payments firm Paytm - alongside its financial affiliate Ant Financial - bringing their stake to 40%.</p> <p>Alibaba and Ant Financial are now the largest shareholders of One97 Communications, the firm behind Paytm, which is now valued at $3.4 billion, the Economic Times reports.</p> <p>Paytm offers a mobile wallet app, online phone credit recharge, and a shopping service. Its been working on synergies with Alibaba since the Chinese e-commerce giant first invested in February.</p> <p>The Indian payments firm has seen its services used by a number of big players in India's burgeoning e-commerce space including Uber and Snapdeal, another Alibaba investment.</p> <p>The firm was also part of a consortium - which also included SoftBank - that pumped $500 million into Snapdeal last month. It looks like Alibaba now has a formidable potion in the sector.</p> <p>&nbsp;</p>
Pimco links Fed, China, commodity deflation & market concerns
Asset Management
<p>Noting that scientist Ivan Pavlov trained dogs to salivate in anticipation of receiving a tasty reward, Pavlov’s experiments translate into the current market environment, a recent Pimco strategy note observed. Investors have become trained to react negatively simply at the anticipation of a Fed rate hike, and the Fed is accomplishing a task that hasn't been successfully executed in the postwar era, they note.<br /> Pimco: Fed is eliciting typical Pavlovian response, causing markets to shudder at the thought of a rate hike<br /> “In 2015, market volatility has been rooted in a phantom rate hike from the Federal Reserve, which throughout the year has been ringing a bell to warn markets that it is on the verge of raising interest rates for the first time since 2006,” Pimco’s market strategist Tony Crescenzi wrote in a note to investors. “Though it hasn’t happened, the Fed has elicited a typical Pavlovian response, causing markets to shudder at the thought and prompting a very significant chain of events that has rippled throughout global financial markets.”</p> <p>Crescenzi says that the Fed’s much anticipated rate hike isn’t the cause of market volatility, but notes that it has been a catalyst. Crescenzi says the most significant fallout from “the Fed’s phantom rate hike” can be seen in China, connecting two of the primary performance drivers of negative stock market performance. China’s unexpected move to weaken its currency and improve its export sector in August spurred substantial market volatility highlighted by a plunge in global equities prices.<br /> Pimco links Fed rate hike, China and commodity deflation<br /> Linking nervous investors to concerns regarding the August 10 Chinese currency devaluation and a potential September Fed rate hike, Cresenzi says the strengthening U.S. dollar caused China’s currency, the yuan, to move higher on an inflation-adjusted basis, doing so at a time when its economy was weakening.  “This is the opposite of what tends to happen and it is an undesirable outcome for a central bank seeking to stimulate economic growth by cutting interest rates…” he wrote.</p> <p>Cresenzi noted the strengthening U.S. dollar along with “the anxious anticipation of a Fed rate hike by investors throughout the world sparked a cascade of events,” which are all inextricably linked. The Fed, China and the last leg of the troika of market concerns is the decline in commodity prices, which tend to fall when the dollar strengthens.</p> <p>“That markets have moved so significantly on the prospect of a Fed rate hike exposes the fragility of the global financial system, which remains mired in a lengthy era of deleveraging,” he wrote. “It demonstrates the difficulty that central banks face in escaping crisis-era policies, including zero percent policy rates.”<br /> Former Fed Chair Bernanke reminds Pimco that coming off zero has never been accomplished successfully in the post-war era<br /> It is the zero interest rate trap that Cresenzi notes former Fed Chair </p>
What happens when public pension funds go activist?
Asset Management
<p>As activist investing continues to spread in popularity, we've begun seeing studies that attempt to gauge whether activism actually creates value for shareholders or not. Public pension funds are starting to get in on the action, now becoming a formidable force in the activist arena as Proxy Monitor found that this year nearly one-fifth of all the shareholder proposals brought to Fortune 250 companies were sponsored by them.</p> <p>Now there's a new study that looks at whether public pension fund activism makes a difference or not. As it turns out, their activism and even ownership to some degree is correlated with lower stock returns.<br /> Stock returns fall when public pension funds go activist<br /> University of Tennessee Professor Tracie Woidtke analyzed the stock returns of companies that became the activist targets of public pension funds between 2006 and 2014. The Manhattan Institute's Proxy Monitor published her report on the topic as a companion to the regular Proxy Monitor report, and interestingly, she found a correlation between shareholder proposal activism by public pension funds and lower stock returns.</p> <p>She examined Fortune 250 companies that were targeted by shareholder proposals from five of the biggest state and municipal pension funds and learned that, on average, the companies' stocks underperformed the S&amp;P 500 Index by 0.9% in the year after the vote on the proposals. Just five big state or municipal pension funds dominate shareholder proposals:</p> <p>Also the number of proposals introduced by those five funds has climbed steadily over the last few years:</p> <p>The public pension fund's activist involvement that had the biggest negative impact on stock prices was CalPERS. The Manhattan Institute warned that the sample sizes for CalPERS, CalSTRS and the Florida fund were probably too small. However, they did have a big enough sample for the the New York State Common Retirement Fund, which also had a huge negative impact on share prices. Woidtke found that companies targeted by that fund saw their stock prices decline by 7.3% compared to the broader market.</p> <p>Proposals on social issues not supported<br /> Perhaps the main reason the New York State Common Retirement Fund's activist campaigns had such a huge negative impact on its targeted impact is because it began to aggressively push out proposals on social issues like political spending starting in 2010. As you can see from the graph, political spending or lobbying made up the lion's share of the fund's proposals over the last decade:</p> <p>There's a marked difference in the strategy employed by the State fund and that used by New York City pension funds, which is more balanced:</p>
Wild ride for leveraged biotech ETFs continues
Asset Management
<p>A week after presidential candidate Hillary Clinton made scathing comments about price gouging by the pharmaceuticals industry, biotechnology stocks and exchange-traded funds remain at the epicenter of what has rapidly become a precariously positioned healthcare sector.</p> <p>However, some bearish leveraged biotech ETFs, namely the Direxion Daily S&amp;P Biotech Bear 3X Shares (NYSE: LABD), are enjoying life in the fast lane.<br /> LABD's Recent Run<br /> After surging more than 30 percent, LABD is up another 15.7 percent at this writing Monday on volume that is already more than double the daily average.</p> <p>LABD underscores how quickly things can change for triple-leveraged ETFs and why the disclaimer that only active traders planning to hold these funds for just a few days should use these products, not buy-and-hold investors, is so often repeated.</p> <p>Read more at Benzinga. <br /> Photo: United States Mission Geneva</p>
Video: Carl Icahn - cabana boy from Brooklyn dishes on the next market meltdown
Hedge Funds
<p>With all the bearishness currently embedded in the markets, I thought it was best to revisit Carl Icahn's Wall Street Week interview from May. Aside from talking about his background, he lays out all his worries about the market, from earnings to high yield bonds, adding that he was "very hedged" back then. Check it out.</p>
Silicon Valley's week of schmoozing with Asian leaders
Venture Capital
<p>Last week we saw a who's who of Silicon Valley rub shoulders with two of Asia's biggest leaders: Indian Prime Minister Narendra Modi and Chinese President Xi Jinping. Here we summarize the two visits and how they reflect on Silicon Valley's evolving ties with Asia.</p> <p>China </p> <p>Xi decided to  kick off his trip to the US last week by meeting with 28 top tech executives. Among them was Apple's Tim Cook, Facebook's Mark Zuckerburg, Microsoft's Satya Nadella, and Amazon.com's Jeff Bezos.</p> <p>The meeting - which actually took place in Seattle - was awkward at best. CEOs hoping to talk with the Chinese leader on such pressing issues as cyber attacks and the theft of intellectual property by Chinese companies instead got a brief address and a photo op.</p> <p>There were some brief moments of light relief: Zuckerberg's exchange with Xi in Mandarin, and the Xi's frequent - if somewhat cheesy- references to US popular culture.</p> <p>The most significant development were a series of proposed tech alliances. Among them was an agreement by search engine  Baidu to promote Window 10 to its users if Microsoft made Baidu the default search engine for operating system's China release.</p> <p>Also ride-hailing app Didi Kuaidi -  which recently backed US counterpart Lyft - agreed to a tie-up with social network LinkedIn to develop artificial intelligence solutions.</p> <p>India</p> <p>Unlike his Chinese counterpart, the Indian prime minister went to meet with US tech leaders in their home turf for a two-day tour where he had a much warmer reception.</p> <p>The highlight was Modi's teary one-on-one chat with Zuckerberg at Facebook's campus. Modi, who is one of the world's most popular political leaders on social media, spoke of his commitment to his "Digital India" agenda, which Zuckerberg also pledged to support.</p> <p>He then went on to Google's headquarters where he met with the firm's India-born CEO Sundar Pichai. The visit coincided with Google's announcement that it would bring wireless to 500 Indian railway stations.</p> <p>But perhaps the biggest score following Modi's trip was Qualcomm Ventures - the investment arm of the US chipmaker - revealing its $150 million India-focused venture capital fund for startups in the mobile and internet-of-everything (IoE) ecosystem.</p>
Video: Activist investing is 'changing drastically'
Hedge Funds
<p>Activist investing is changing quickly, says Donald Drapkin Chairman, Founder and Co-Chief Investment Officer at Casablanca Capital, on Wall Street Week. "These guys are ratcheting up who they're going after," and bigger investors are taking a more activist approach, he says.</p> <p>&nbsp;</p>
ETF Outlook: more biotech blunders or a biotech bounce?
Asset Management
<p>&nbsp;</p> <p>&nbsp;</p> <p>Stocks' September shenanigans continued last week as the S&amp;P 500 lost more than one percent and although the Dow Jones Industrial Average notched a triple-digit gain last Friday, a problem is surfacing: Increasingly bearish action in the biotechnology space.</p> <p>&nbsp;</p> <p>It is not a stretch to say that in the week ahead, this is an issue that traders of and investors in exchange traded funds will be heavily focusing on. That much is confirmed when noting the iShares Nasdaq Biotechnology ETF (NASDAQ: IBB), the largest biotech ETF, slumped 13 percent last week and will enter Monday at its lowest levels in a month. With last week's tumble, IBB now resides nearly 11 percent below its 200-day moving average.</p> <p>&nbsp;</p> <p>As an equal-weight ETF, the SPDR S&amp;P Biotech ETF (NYSE: XBI) has heavier exposure to smaller biotechs than does the rival IBB. So it is not surprising that XBI was worse for the wear last week, sliding 15 percent.</p> <p>Read more at Benzinga. <br /> Photo: 401(K) 2012 </p>
The very best of… Dan Loeb’s letters to CEOs
Hedge Funds
<p>It’s been awhile since we’ve seen Dan Loeb’s poison pen put to good use so, here are the nastiest, the most scathing, and above all, the most hilarious letters of his from back in the day – just in case you forgot why the New Yorker called him the “angry investor” back in 2005.</p> <p>Enjoy.</p> <p>Letter to InterCept Inc., 2004<br /> “Do not confuse our $22 million stake as a vote of confidence in the Company’s senior management or its Board of Directors. On the contrary, it is our view that your record in management, acquisitions and corporate governance is among the worst that we have witnessed in our investment career… “</p> <p>“…The Company’s proxy statement provides us with our first indication that a “good ol’ boy” (“GOB”) set of ethics prevails at the Company rather than standards dictated by fairness and good judgment. First, the Company employs the C.E.O.’s daughter, Denise, and her husband David Saylor, who received total compensation of $238,776 in 2003. I called Mr. Saylor last Friday at 4:00 p.m. at the Company’s offices to learn more about the core product that he presumably sells. He had his calls forwarded to his cell phone since it was still business hours. I identified myself as a shareholder interested in learning about the core product lines to which he replied that he could not speak as he was “on the golf course.” I was not sure whether it was his relation with his father-in-law or the $238,776 salary that affords him the opportunity to work on his golf game during business hours.”<br /> Letter to Ligand Pharmaceuticals, 2005<br /> “When one analyst was queried about the reputation of the senior executives at the Company, he said that you [Ligand C.E.O. David Robinson] are “the worst CEO in biotech”, and another analyst we spoke with attributed the significant valuation disparity between the current stock price and the much higher intrinsic value of the Company to the “David Robinson Discount”. I must wonder how in this day and age the Company’s Board of Directors has not held you and [Ligand C.F.O.] Paul Maier responsible for your respective failures and shown you both the door long ago—accompanied by a well worn boot planted in the backside.”<br /> Letter to Star Gas Partners, 2005<br /> “Sadly, your ineptitude is not limited to your failure to communicate with bond and unit holders. A review of your record reveals years of value destruction and strategic blunders which have led us to dub you one of the most dangerous and incompetent executives in America. (I was amused to learn, in the course of our investigation, that at Cornell University there is an “[Star Gas C.E.O.] Irik Sevin Scholarship.” One can only pity the poor student who suffers the indignity of attaching your name to his academic record.)”</p> <p>“…how is it possible that you selected your elderly 78-year old mom to serve on the Company’s Board of Directors and as a full-time employee providing employee and unitholder services? We further wonder under what theory of corporate governance does one’s mom sit on a Company board. Should you be found derelict in the performance of your executive duties, as we believe is the case, we do not believe your mom is the right person to fire you from your job…. We insist that your mom resign immediately from the Company’s board of directors.”“<br /> Letter to Potlach, 2003<br /> “Since you ascended to your current role of Chief Value Destroyer (“C.V.D.”) when you assumed the formal title of C.E.O. in 1999, the shares have dropped over 45%, a destruction of shareholder value in excess of $520 million. This negative sum does not include the declin</p>
Didi Kuaidi snaps up stake in Ola
Venture Capital
<p>This week in unicorns, Chinese decacorn Didi Kuaidi and its backers have turned their fight against Uber all the way up to 11.</p> <p>According to TechCrunch, China’s largest ride sharing firm taken part in funding round worth about $500 million for India’s dominant ride-hailing app, Ola.</p> <p>How much the Beijing-based company invested in Ola is still unknown, what we’re sure of though is that the round valued the Bangalore-based firm at $5 billion, making it one the largest ride-app companies currently going.</p> <p>This is the latest salvo in a war being waged against Uber being waged by a global consortium that also includes the likes SoftBank, Alibaba and Singapore fund Temasek. As the raging quinquagintacorn continues to scale up, the coalition has been backing Uber's competitors in all its key markets – including Uber’s home turf.</p> <p>Didi inked a deal with US-based Lyft this month that will allow the two companies to shares riders across the world, and just to be sure, it invested $100 million in the firm as well. It also injected an unspecified amount of cash in Southeast Asia’s GrabTaxi, an investment that will surely cement Didi’s place in the region’s burgeoning car service arena.</p> <p>How Uber will respond to this is anyone’s guess, but given Didi’s great choice of investments, CEO Travis Kalanick is no doubt having some sleepless nights.<br /> Photo: Abhijit Patil</p>